Finance Of America Companies Inc. (NYSE:FOA) Analysts Just Trimmed Their Revenue Forecasts By 16%

The latest analyst coverage could presage a bad day for Finance Of America Companies Inc. (NYSE:FOA), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well. What's more, Finance Of America Companies has been out of favour with the market in recent times, so it will be interesting to see if this downgrade is enough to sink the stock even further. The stock has already fallen 4.8% to US$2.36 in the last week.

Following the latest downgrade, the current consensus, from the four analysts covering Finance Of America Companies, is for revenues of US$1.4b in 2022, which would reflect a perceptible 6.8% reduction in Finance Of America Companies' sales over the past 12 months. Losses are expected to turn into profits real soon, with the analysts forecasting US$1.20 in per-share earnings. Previously, the analysts had been modelling revenues of US$1.7b and earnings per share (EPS) of US$0.99 in 2022. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also granting a sizeable expansion in to the earnings per share numbers.

Check out our latest analysis for Finance Of America Companies

the analysts have cut their price target 22% to US$4.50 per share, suggesting that the declining revenue was a more crucial indicator than the expected improvement in earnings. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Finance Of America Companies analyst has a price target of US$8.50 per share, while the most pessimistic values it at US$2.50. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Finance Of America Companies' past performance and to peers in the same industry. We would also point out that the forecast 9.0% annualised revenue decline to the end of 2022 is better than the historical trend, which saw revenues shrink 29% annually over the past year Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 3.7% annually. So while a broad number of companies are forecast to grow, unfortunately Finance Of America Companies is expected to see its sales affected worse than other companies in the industry.

The Bottom Line

The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Finance Of America Companies' revenues are expected to grow slower than the wider market. Furthermore, there was a cut to the price target, suggesting that the latest news has led to more pessimism about the intrinsic value of the business. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on Finance Of America Companies after today.

Still, the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Finance Of America Companies going out to 2024, and you can see them free on our platform here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.